ORDER
P. Karthikeyan, Member (T)
1. The captioned appeal filed by M/s. Hindustan Unilever Ltd. (HUL), challenges the classification of its product ‘New Creamy Ponds Moisturising Face Wash’ (NCPMFW) as a skin care preparation under CSH 33.04 of the CETA ’85 and consequent demand of differential duty affirmed in the impugned order. An amount of Rs. 3,13,17,442/- has been demanded as differential duty for the period 1994-95 to 2001-02 (upto July 2001). In passing the orders the lower authorities relied on the test report of the subject product claimed by the appellants to be a washing preparation of CSH 3402.90. On test by the Chemical Examiner and the Chief Chemist, the product was found not to satisfy the prescription in Chapter Note 3 of Chapter 34 for Organic Surface Active Agents (OSAA).
2. HUL has obtained test reports on samples of the product from the Tamilnadu Government Test Laboratory and Vimta Labs, a private lab. Both the test reports certified that the impugned product satisfied the above definition for OSAA.
3. The ld. Counsel for HUL reiterates the grounds in the appeal and invites our attention to Note 3 of Chapter 34 CETA’ 85 and submits that the said Note defined Organic Surface Active Agent of CSH 3402 and not a preparation containing OSAA. As per the HSN Explanatory Note on page 521 preparations containing wholly or partly of OSAA were washing preparations covered by CSH 3402. In Mul Dentpro Pvt. Ltd. v. CCE Ahmedabad reported in 2007 (218) ELT 435 (Tri.-Ahmd.), the Ahmedabad Bench of the Tribunal had decided the classification of similar product as washing preparation of CSH 3402. This decision had followed the above reasoning.
4. He further submitted that CSH 34.02 covered surface active agents as well as surface active preparations. The chemical examiner’s report had confirmed that the product is in the form of translucent white aqueous soft pasty mass composed essentially of surface active agents, polyhydric alcohol, cellulosic substance, perfume and other additives. The Director CRCL, had confirmed the above report. The impugned item was a surface active preparation specifically covered under CSH 34.02. Classification should not be governed by the claims in the advertisement or on the package as held in several judicial authorities. The product could be used for cleaning and washing face or any part of human body. The product was in the nature of toilet soap. It was not a cosmetic cream which was applied after a wash. The product was essentially a wash off preparation. NCPMFW was classifiable under 3402.90 and the demands were unsustainable.
5. Ld SDR supports the impugned order. One of the case law submitted by the SDR to back his arguments is a decision of the apex Court which observed that the test reports of the CRCL should not be brushed aside lightly and another decision which underlines the primacy of the guidelines contained in HSN in deciding classification. He takes us through the following Note 5 of Chapter 33 of the Central Excise Tariff in his endeavour to justify classification decided in the impugned order.
Heading No. 33.04 applies, inter alia, to the following products: beauty creams, vanishing creams, cold creams, make up creams, cleansing creams, skinfoods, skin tonics, face powders, baby powders, toilet powders, talcum powders and grease paints, lipsticks, eye shadow and eyebrow pencils, nail polishes and varnishes, cuticle removers and other preparations for use in manicure or chiropody and barrier creams to give protection against skin irritants.
6. We have carefully considered the submissions and case records. We find that the test report of the Chemical Examiner relied on by the authorities reads as follows:
The sample is received in unit packing collapsible tube described as “New Creamy Ponds Moisturising Face Wash”. It is in the form of translucent white aqueous soft pasty mass composed essentially of surface active agent, polyhydric alcohol, cellulosic substance, perfume and other additives. Such types of preparation are stated in the literatures to be used for the care of the skin. The sample does not satisfy the conditions specified in the chapter note 3 of the chapter 34 of Central Excise Tariff.”
Note 3 to Chapter 34 is reproduced below.
For the purposes of heading No. 34.02, ‘organic surface-active agents’ are products which when mixed with water at a concentration of 0.5 per cent at 20 deg. C and left to stand for one hour at the same temperature:
(a) Give a transparent or translucent liquid or stable emulsion without separation of insoluble matter; and
Reduce the surface tension of water to 4.5 x 10-2 N/m (45 dyne/cm) or less.
We find that above Note defines OSAA of CSH 3402.
6.1 Chapter Heading 34.02 reads as follows:
Organic surface active agents (other than soaps), surface active preparations, washing preparations (including auxiliary washing preparations) and cleaning preparations whether or not containing soap
340210 – Sulphonated castor oil, fish oil or sperm oil
340290 – Other
HSN notes on CH 3402 reads as follows:
Chapter Heading 34.02 covers organic surface active agents (other than soaps), surface active preparations, washing preparations (including auxiliary washing preparations) and cleaning preparations whether or not containing soap, other than those of heading No. 34.01″.
HSN notes divide these goods in two parts. Part-I covers “organic surface active agents” and part-II covers “organic surface active preparations, washing preparations including auxiliary washing preparations and cleaning preparations”.
Part -II is further divided into the following 3 categories of preparations:
A. Surface active preparations.
B. Washing preparations (including auxiliary washing preparations) and cleaning preparations having the basis of soap or other organic surface active agents.
C. Washing or de-greasing preparations not having the basis of soap or other organic surface active agents.
While describing surface active preparations, HSN Notes at page 521 state that surface active preparations and washing preparations other than those of heading 34.01 “includes preparations consisting wholly or partly of organic surface active agents in the form of liquid or cream whether or not put up for retail sale for washing the skin.
6.2 It is clear from test reports of the Chemical Examiner and Director, CRCL that the item is a preparation wholly or partly consisting of OSAA. It is used for applying on the skin and washing off. Therefore the impugned item qualifies to be classified under Chapter 34. Category B of Part II of HSN Notes reproduced above covers washing preparations, auxiliary washing preparations and certain cleaning preparations. These preparations generally contain essential constituents and one or more subsidiary constituents. The essential constituents are synthetic organic surface active agents. And subsidiary constituents are:
1. Builders (ex. Sodium poly phosphates, carbonates, silicate or borate, salts of Nitrilotri acetic acid)
2. Boosters (ex. Alkanol amids, fatty acid amids, fatty and oxides)
3. Fillers (ex. Sodium sulphate or chloride) for ancillaries (ex. Chemical or optical bleaches, corrosion inhibiters, colouring matter, perfumes, enzymes).
6.3 Vide letter dated 10.07.01, Director CRCL, confirmed that the product composed essentially of surface active agents, poly hydric alcohol, cellulosic substance, perfume and other additives.
7. We find that the impugned product is applied on the face for its care as per the show cause notice. From the test results relied on by the revenue, it is seen that the impugned item is ‘composed essentially of surface active agent, poly hydric alcohol, cellulosic substance, perfume and other additives’. The product therefore conforms to the description of washing preparation consisting partly of OSAA as per the explanatory notes of HSN. A skin care product is applied on the skin and normally allowed to stay for some time. As the name suggests the products is a face wash. NCPMFW is applied thinly on the face and soon washed off as per the instructions on the tube (container). The product is more a washing preparation as per common parlance as well. It is settled that HSN Notes are a safe guide in classifying goods under Customs Tariff and Central Excise Tariff. Following the HSN Explanatory Notes, the impugned product is correctly classifiable under CSH 3402.90 as claimed by the appellants and not under CSH 33.04. We therefore set aside the impugned order and allow the appeal filed by HUL.
(Operative part of the Order pronounced in open Court on 25.03.08)